LAT: Russian Events Leave White House Wary (M.Reynolds)

Los Angeles Times November 1, 2003 Russian Events Leave White House Wary Turmoil in Kremlin stemming from an oil tycoon s arrest is met with dismay. U.S. seeks

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, Nov 1, 2003

Los Angeles Times
November 1, 2003

Russian Events Leave White House Wary

Turmoil in Kremlin stemming from an oil tycoon's arrest is met with
dismay. U.S. seeks to encourage Moscow to change course.

By Maura Reynolds, Times Staff Writer

WASHINGTON — Just a few weeks ago, Bush administration officials were
upbeat about relations with Russia, holding a chummy Camp David summit
with President Vladimir V. Putin that both sides said put tensions over
Chechnya and Iraq to the side.

But the arrest of Russia's most powerful oil magnate a week ago
triggered turmoil in the Kremlin that has left official Washington
searching for a response to a Russian power struggle with potentially
far-reaching consequences.

Administration officials said they were still trying to understand how
the arrest of Mikhail Khodorkovsky — head of Russia's largest oil
company and the country's richest man — caused a crisis in the Kremlin
that led to the resignation of Putin's chief of staff and raised the
specter of a KGB resurgence at the highest levels of the government.

Disappointment with Russia was palpable in Washington.

"After Camp David, there was hope the relationship could take on a more
concrete basis," one administration official said. "What happened this
week is not going to help that in the least."

Russia watchers have long been fixated on the Kremlin rivalry between
two camps loyal to Putin — former KGB officials on one hand and crony
capitalists allied with the chief of staff, Alexander S. Voloshin, on
the other. It has often been seen as a kind of struggle for Putin's
soul, with both sides cast as devils: one side seeking a return of
police-state controls and the other promoting the interests of corrupt
oligarchs.

"There are no white hats," said Fiona Hill, a Russia scholar at the
Brookings Institution in Washington.

Understanding that, U.S. policymakers have long steered clear of
thematic goals like promoting democracy or free markets and focused
instead on concrete U.S. interests, including anti-terrorism cooperation
and improving the climate for business investment in Russia.

Administration officials were still debating whether Bush should
telephone Putin for a heart-to-heart, and suggested that such a chat
might be in the offing in the near future. But they have not been idle
in the interim. Several sources said the administration has repeatedly
communicated with Russian officials in recent days, including some
occupying high posts in the Kremlin, to express concern about the
Khodorkovsky case.

The official language has been cautious.

"The manner in which this case is being handled has raised significant
concerns about the state of the rule of law and the investment and
business climate in Russia," said National Security Council spokesman
Sean McCormack. "It is important for Russian authorities to dispel
concerns that this case is politically motivated."

U.S. officials said privately that the language was carefully chosen to
suggest that the administration does, in fact, believe Khodorkovsky's
arrest and the seizure of his assets were politically motivated.

U.S. interest in the development of Russian democracy has waned in
recent years, but at least three constituencies remain: human rights
advocates, the nuclear nonproliferation community and investors.

Of those, the first two see Russia as a problem; only the investment
community has viewed Russia as it wishes to be viewed — as a partner. In
that light, several officials said Putin miscalculated, believing that a
crackdown on Khodorkovsky would stir little interest outside Russia.
Instead, it threatens to undermine the nation's strongest supporters in
the United States.

"It is much easier to destroy than to build investor confidence," Eugene
Lawson, president of the U.S.-Russia Business Council, warned pointedly.

Another council official, Executive Vice President Blake Marshall, said
several business deals worth hundreds of millions of dollars have been
held up in the last week because of concerns about Khodorkovsky.

"The much bigger concern is whether any of this might mean some kind of
renationalization," Marshall said. "Uncertainty is the worst enemy of
foreign investors."

Among many Russia watchers, there has been frustration in recent years
that the U.S. government — the Clinton as well as Bush administrations —
has made security and business concerns such high priorities that they
soft-pedaled matters of principle such as establishing the rule of law
and protecting human rights.

Some observers are now arguing that the United States should take a
strong public stand criticizing Russia.

Richard Perle, a former Reagan administration official whose
neoconservative views have been influential behind the scenes in
Washington, called Friday for Russia to be excluded from the Group of 8
industrialized nations.

"If the G-8 have any standards at all, Russia no longer qualifies for
membership," Perle said.

The Khodorkovsky case "shows they are prepared to seize assets and
persecute entrepreneurs for their political behavior. That falls below
the standards of the other members."

But officials within the Bush administration said they were not yet
considering anything so drastic.

Instead, they said it was important to respond in a way that would not
back the Kremlin into a corner, but instead encourage it to shift course.

"All hasn't been lost," another administration official said. "Their
initial reaction has been terrible. But the important thing is to act to
galvanize events in a way that sets up the next step forward."

U.S. officials expect to follow their existing schedule of contacts with
their Russian counterparts, he said. The agenda "is moving forward.
There is nothing that has happened in the last week that has moved that
backward."

At least, he suggested, not yet.

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